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Alberta-based Stealth Ventures Ltd. has entered into an agreement with Clean Coal Ltd. (CCL), for the development of an underground coal gasification (UCG) project in the Cumberland Basin of Nova Scotia. The coal would be burned in place to create gas, rather than mining it for processing on the surface.

Stealth currently holds 100% of the coalbed methane rights of a 177,000-acre property in the Cumberland Basin, which represents a gas resource play estimated by Sproule Associates Limited to contain net 1.183 Tcf of discovered coalbed methane (CBM) resource.

"There is no question that we feel there is tremendous potential for the Cumberland Basin and that it was a matter of applying the right technology to harness the resource. We believe that UCG technology has not only great applications for Nova Scotia but can play a bigger picture in Canada's energy supply strategy," said Stealth's CEO Derek Krivak. "And we understand that the Province of Nova Scotia is currently examining the viability of such an industry for the province from economic as well as environmental standpoints."

The agreement with Stealth marks the commencement of CCL's strategy to develop multiple UCG projects in Canada. CCL is an internationally based company whose technical team is in the United Kingdom.

UCG is a proven method of burning deep seam coals in place, producing a combustible gas used for power generation or as a feedstock for the manufacture of hydrogen, chemicals or transportation fuels. The method was first developed more than 50 years ago but was not considered commercially viable until recently with higher-priced competing fuels and the emphasis on restraining carbon dioxide emissions.

The gasification of coal in-situ is achieved by drilling boreholes into the coal and injecting either air or oxygen mixtures to achieve gasification in one step without the need to mine or extract coal. CCL will seek to combine UCG with carbon capture sequestration to produce a high-quality, clean, affordable synthetic gas.

The process also is being explored in India, China, Australia and South Africa. Since there are no large UCG facilities in operation, some experts have voiced concerns over the unknown, for instance that it might contaminate underground water supplies or cause surface subsidence when the coal is burned out and the land above collapses into the cavities. The problem of subsidence and pollution from fires burning for decades in abandoned coal mines has plagued coal-producing countries all over the world. UCG proponents claim that technological developments now enable them to closely control the burning process.

In the United States projects are under consideration for an alternative method of converting coal to a gas, such as through integrated gasification combined-cycle (IGCC) systems in which the coal is mined, brought to the surface and then heated to make synthetic gas. Because of the mining this is a more costly process and the facility then also must dispose of the carbon created in the process. With UGC the carbon remains underground.

"Recent developments in directional drilling technology and the growing need for new, plentiful and low-impact sources of energy means that underground coal gasification can play an important role in regional economic development and energy independence," said Graham Chapman, COO of CCL.

"UCG, as a method to harness the high Btu content of one of the world's most abundant sources of energy while eliminating the costly, invasive and sometimes dangerous need to mine it first, is gaining acceptance with numerous projects under development in markets worldwide." Clean Coal Ltd. specializes in UCG and is developing projects in targeted global markets including North America and Europe.

The United Kingdom Coal Authority has recently awarded five licenses to CCL to develop offshore sites for UCG. The company's operations and technical team claims experience in UCG project design, planning, and implementation, including environmental planning. Development of the UCG project in Nova Scotia will be subject to due diligence and various Government of Nova Scotia regulatory approvals. No further terms or conditions were announced.

Stealth is a Calgary-based junior oil and gas company whose expertise and focus is on "unconventional" gas reserves from shale gas, CBM and tight gas sand reservoirs. The company, which describes itself as a "highly speculative" venture into new technology and geology, has begun Alberta's first shale gas production in an area called Wildmere, southeast of Edmonton (see NGI,Dec. 21, 2009).

A recent report by the Geological Survey of Canada, its first in the area in more than 20 years, found a high hydrocarbon resource potential across 100,000 square miles of Eastern Canada, including eastern Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and the Gulf of St. Lawrence and Cabot Strait. In the area that includes the northern extension of the Appalachian Mountains, the potential appears centered on CBM and shale gas (see NGI,Nov. 30, 2009).

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